Why Wall Street Was Wrong About The Jobs Report

Today's Nonfarm Payrolls report disappointed investors and fell
far short of even the most conservative estimates on the Street,
even worse than our bearish 193,000
call.

With 80 economists making predictions for this report and a
standard deviation of 18,000, the smallest standard deviation
since 2007, the probability that
nonfarm payrolls would increase by just 120,000 is less than
0.0142 percent.

But that shouldn't surprise you. Last month Business Insider crunched the data on
economist accuracy, and found that 41 percent of the time the
consensus estimate was far from right.

However, last month's report relied upon final revised data from
the Bureau of Labor Statistics, which you could argue missed the
main impact the headline number had on markets.

Today we look at the first reported change in nonfarm payrolls,
before the BLS made any revisions.

What we found: Over the last decade, first reported
nonfarm payroll growth and contraction fell outside of 2.58
standard deviations 41.7 percent of the
time. In statistics, 2.58 standard
deviations represents a 99 percent confidence interval.

Statistically, if you accept the notion that the Street's
consensus is correct, a result falling more than 2.58 standard
deviations should happen only once every 100 times.

It's important to note that the estimates do not necessarily fall
perfectly under a normal curve. However, the distributions do
generally take the bell shape and cluster together centrally
around the mean.

Below we present first reported NFP results compared to
Bloomberg's consensus estimate. The meaningful point to look at
is the t-test standard deviation, or how far the
actual NFP number was from consensus estimates (a line
highlighted in blue represents a result outside of the 99 percent
confidence interval).